Energy innovation and grid modernization

A report released just before the holidays, "Transforming U.S. Energy Innovation," from the Energy Technology Innovation Policy research group at the Belfer Center for Science and International Affairs at Harvard's Kennedy School of Government, is worthy of notice.

That is, for those of us who understand science's role in securing our energy and economic security in an age of unfettered global competition, in which failure to act in a concerted, urgent fashion seals our decline relative to our competitors. "Concerted" here means public-private efforts that align government policies and resources with clear market objectives and private-sector incentives. This approach at least plays off my theme from last week, elucidated in "Electric Vehicles: Rorschach Card for Election Year?"

It would be nearly impossible not to make the connection with grid modernization, but just in case, recall that research and development in the power industry is a major issue and that, despite controversy, much value will be derived from the deployment strategy facilitated by grants made under the American Recovery and Reinvestment Act.

"The driver for the report is the recognition that the world needs a revolution in energy technologies," said Laura Diaz Anadon, director, Energy Technology Innovation Policy, Harvard's Kennedy School of Government. "We cannot continue on the path we're on right now. Our energy systems are relying on fossil fuels, relying on fuels from unstable parts of the world. And what our group and other groups have been realizing over the past ten, twenty years is that we need a new range of energy technologies that can allow us to grow in industrial and developing countries. Our approach was to take a systems approach to the innovation system in the United States."

Matthew Bunn, associate professor of public policy, Harvard's Kennedy School of Government, added to his colleague's opening point.

"Our report looks at several different things," Bunn said. "First, we need to do more federal government investment in the initial research, development and demonstration of these new technologies. And if the federal government spends more, it should get more bang for the buck. So we looked at the performance of the [national] labs and other energy innovation institutions. We asked, 'How can we make those more efficient and effective?'"

The research included addressing key questions: How much can we reduce dependence on foreign oil? How can we reduce the cost of each energy system? How can we reduce carbon emissions?

"The private sector is an even more key player, in some ways, than the federal government, which has a role in getting technologies to the point that the private sector can take them up," Bunn said. "How can we give the private sector the incentives to deploy those technologies? We looked at the private sector today and did an unprecedented survey of private sector energy innovation and what it takes for the federal government to motivate more work in the private sector."

Anadon continued with a few findings.

"In our research we identified areas that would benefit from large percentage increases in funding from the government for energy R&D," Anadon said. "And the areas we found that would benefit the most from these increases are solar photovoltaics, batteries for utility-scale energy storage, bio-energy and building efficiency.

"We also found there were three technology areas would benefit from increases in funding," she continued. "However, these increases in funding are smaller, in percentage terms: nuclear power, vehicles and coal and natural gas with carbon capture and storage."

Bunn made the pitch.

"We think that even at a time of budget constraints, it's crucial to make high pay-off, long-term investments that are important to the future of our country," he said. "If you look at the past, the investments that have been made in [energy] efficiency and renewables have paid off—usually. That's been confirmed by the National Academy of Sciences and other [groups]. It's clear that those investments have resulted in huge economic payoffs for the United States. In fact, we found that a few billion dollars more a year today in energy R&D could lead to hundreds of billions of dollars in savings to the economy in a strict carbon scenario by 2050, for example.

"These investments are important to the future of the country and there are lots of ways to fund them," Bunn added. "For example, in the past, a small fee was put on transfers of natural gas through pipelines to fund research on the recovery of natural gas. That research actually led to huge improvements in the recovery of natural gas from, for example, coal-bed methane. So that's a way you can imagine doing this [R&D] outside the normal appropriations process. It doesn't add to the deficit of the U.S. government."

Anadon acknowledged that the national lab system, for instance, had room to improve.

"What we found in our study of the National Renewable Energy Laboratory is that while it has some capabilities that are very valuable, such as providing testing facilities that private firms can use ... we found many things that hampered its ability to be more effective," she said. "For instance, the labs face vulnerable budgets. [R&D] activities that take a long time face uncertain funding in different areas. That doesn't help.

"We also found that there wasn't enough information about the markets being used at high levels of decision making," Anadon added. "So researchers at the national labs are working with private firms that have a lot of technical and market knowledge, but aren't contributing as much as they could to decisions at higher levels over where to expend funds. And we also found that there weren't enough incentives for entrepreneurship."

Bunn extrapolated on that point.

"It's crucial to structure the market so that companies have the incentive to deploy these low-carbon, innovative technologies," he said. "If it remains free to dump your pollution into the atmosphere, people will continue to do that. We found that you need a burst of investment in the R&D to develop new energy technologies, but you also need the government policies to give incentive to the private sector, which ultimately deploys new technologies, to deploy them. You need to integrate your policies to develop new technologies with your deployment policies."

"The U.S. risks missing a lot of new markets in the future if it's not active in at least some of these areas," Anadon concluded. "We have seen China taking the lead in manufacturing wind turbines, solar panels and other technologies. Energy markets will continue to grow and it wouldn't be smart policy for the U.S. government if it just decided not to compete in any of these markets."

Bunn acknowledged, in closing, that the task before us is huge.

"The world and the United States need a transformation of the energy technology we have available," Bunn said. "We'll need dramatically more energy to fuel a growing world. And we need to produce that energy without dumping so much carbon into the atmosphere. In fact, we need a drastic reduction in the amount of carbon going into the atmosphere as we're ramping up the amount of energy we produce. That's a huge challenge."

Just another bunch of over-educated eggheads who don't "get" the "free market"? Or accomplished scientists who've studied the art of the possible and see a path ahead, based on objective analysis? I think we've heard far more than enough from the former and too little from the latter. Chew it over.

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